EUR/USD Forecast: Bulls likely to target Jan. swing highs, eyeing Euro-zone GDP figures

A surprisingly dovish tone by the Federal Reserve triggered a fresh wave of US Dollar sell-off and lifted the pair to near three-week tops during the US trading session on Wednesday. In its first policy update of the year, the Fed said that it would adopt a more patient approach on future interest rate increases and further indicated that its efforts to reduce the $4 trillion asset portfolio could end sooner than expected if the economic situation or financial markets deteriorated.

An aggressively dovish pause helped the pair to reverse an early dip, led by softer than expected German CPI and upbeat US ADP report and rally nearly 100-pips intraday to reclaim the key 1.1500 psychological mark. Data released on Wednesday showed German CPI dropped -0.8% m/m in January and the annual rate slowed sharply to 1.4% y/y, down from 1.7% previous and 1.6% expected. Meanwhile, ADP report showed that the US private sector employers added 213K new jobs in January, though the market reaction turned out to be rather short-lived.

The pair held on to its positive tone through the Asian session on Thursday and was now looking to build on the positive momentum further beyond the 1.1500 handle. Today's economic docket highlights the release of flash Euro-zone GDP growth figures, expected to show that the economy expanded 0.2% q/q during the fourth quarter of 2018 and the annualized growth rate slowing to 1.2% from the previous quarter's print of 1.6%. Meanwhile, any disappointment might be offset by the prevailing bearish sentiment surrounding the greenback and seems unlikely to hinder the ongoing positive momentum. 

Even from a technical perspective, the overnight bullish breakthrough 100-day SMA barrier now sets the stage for a retest of monthly tops, around the 1.1570 region, above which the pair is likely to aim towards reclaiming the 1.1600 handle. On the flip side, the 1.1480 level, closely followed by mid-1.1400s (100-DMA) should now act as strong support and protect any immediate meaningful downside. Any subsequent slide is more likely to be utilized as a buying opportunity and hence, should be limited till 50-day SMA support near the 1.1400 round figure mark.